Taking On Obamacare With Tax Reform May Backfire For Republicans

Legislation and regulation books are at the ready ahead of a markup session of the proposed House GOP tax reform bill on Capitol Hill.

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At first glance, adding a provision to the Senate tax bill that would repeal Obamacare’s individual mandate seems like a huge political risk for Republicans. On second glance, “blunder” might be a more accurate assessment.

There is an obvious policy rationale for their move. Republicans are trying to find ways to raise government revenue to limit how much the federal deficit would increase if their proposed tax cuts for both individuals and corporations went into effect.

In a report this month, the Congressional Budget Office estimated that repealing the Affordable Care Act’s individual mandate (the requirement that people purchase health insurance or pay a fine) would save the government $338 billion over the next 10 years. That’s because without the requirement, the CBO calculates that 13 million Americans would not get any insurance, thereby saving the federal government from the costs for people whose coverage (either via Medicaid or the health care exchanges established under Obamacare) is heavily subsidized by taxpayers.

Also, Republicans generally hate the idea that the federal government is forcing people to buy health insurance.

And it seems like that might be an aspect of Obamacare where voters agree with Republicans. Polls show that many Americans oppose the individual mandate and that it is far less popular than two other key provisions in the Affordable Care Act: the requirement that insurers not charge higher prices or reject people with pre-existing conditions and the part of the law that expands Medicaid to millions of people. There is also some dispute about the policy impact of the mandate: Do some people choose to buy insurance only because they’re required to do so or are they making that decision based on other factors as well, particularly the cost of their coverage?

At the same time, there could well be costs to repealing the mandate. The CBO estimates that scrapping it would increase premiums by 10 percent for those who remain in the Obamacare marketplaces (primarily because some healthier people would forgo insurance, meaning that the Obamacare marketplaces would have a larger share of people with expensive health needs). And experts say health insurers might choose to leave the Obamacare marketplaces if the mandate is eliminated.

And there are two constituencies that argue that unraveling the individual mandate is a terrible policy move: liberal activists and the health care industry. They could now be energized to step up attacks on the tax bill. It’s hard to measure this precisely, but the intensity of the opposition whipped up by liberal groups like MoveOn.org and Indivisible seemed to complicate the failed Republican effort to repeal Obamacare. Sen. Susan Collins of Maine was literally cheered by constituents as she emerged as one of the leading Republicans against the legislation.

Then there’s the issue of finding enough Republican votes, given that the Democrats are almost sure to continue their universal opposition to a bill that axes Obamacare provisions. So far, there are only about 11 Republicans in the House and none in the Senate who seem to truly oppose the tax plan — without the Obamacare provision. That leaves enough members to pass the legislation.

But 20 House Republicans voted against Obamacare repeal. Anywhere from three to nine Republicans voted “no” on the various repeal bills that came up for a vote in the Senate. We don’t know if these members will view repealing the individual mandate as something akin to repealing Obamacare. Collins in particular focused much more on defending Medicaid and pre-existing condition coverage than the mandate when she joined John McCain of Arizona and Lisa Murkowski of Alaska in voting against the GOP’s most recent Obamacare repeal effort. So this is not a one-to-one comparison. But at first glance, the Republicans have greatly added to the number of members who might vote against the tax bill by sticking a partial Obamacare repeal in it. On the tax legislation, the House can afford only 22 Republican “no” votes, while the Senate can afford only two.

In the Senate, members who looked likely to be most resistant to the tax plan before this individual mandate provision was floated are basically the same bloc that opposed Obamacare repeal. But in the House, the members could well be different. The House members who opposed Obamacare repeal were a fairly diverse group in terms of ideology and geography, while the ones who are wary about this tax bill so far are heavily from New Jersey and New York, where residents may face higher taxes because the bill limits deductions for state and local income taxes. Republicans in the House might have up to 25 potential “no” votes right now (combining the group that opposed the ACA repeal and those already opposed to the tax bill, minus the members who are in both groups).1

Republican leaders in the Senate have promised, after the tax legislation, to take up the bipartisan so-called Alexander-Murray bill that is supposed to help shore up the Obamacare markets — which could help bring members like Collins on board. Democrats had previously supported that legislation but have suggested that they will withdraw that support if the individual mandate is eliminated. Unlike the tax bill, which can pass the Senate with 51 votes,2 Alexander-Murray would require 60 votes to pass, so unified Democratic opposition would kill it. And Alexander-Murray might not address the challenges created by eliminating the mandate. So it’s not totally clear whether Collins and her colleagues would consider a vote on Alexander-Murray sufficient to address her concerns.

Another potential issue for Republicans is that President Trump has been touting the idea of adding Obamacare repeal to the tax plan for days now. Why is that a problem? Well, by taking one of Trump’s ideas, party leaders could be encouraging the president to get more involved in crafting a tax bill — and there is little indication so far in his presidency that Trump’s input is helpful to getting complicated bills passed on Capitol Hill. Secondly, if Republicans determine later on that this idea doesn’t work in terms of policy or can’t get the votes to pass a bill, they could face mocking from the president via Twitter, as they did as the Obamacare repeal efforts failed.

So I’m skeptical about this idea. But I do understand why Republican leaders are headed in this direction. Republicans plan to use the savings from a repeal of the individual mandate in part to increase the child tax credit, a move aimed to placate senators like Kentucky’s Rand Paul and Florida’s Marco Rubio, who have suggested that the tax legislation is not giving enough benefits to middle-class families. So chucking the mandate may help win their votes. And Democrats may have a harder time getting people as excited to “defend the mandate” as they did to “save Medicaid.”

Either way, dear reader, you are not experiencing déjà vu. The Republicans in Congress really are talking about repealing some parts of Obamacare. Again.

Footnotes

The House is expected to vote Thursday on a version of the tax plan that does not include repealing the individual mandate.